Outlook Promising for Auto Market

Automobile dealers need to keep pace with the changing paradigm

Indian automotive market is poised for a big leap forward. Growth drivers such as steadily expanding economy, rising income levels and changing lifestyles, particularly the growing aspirations of rural India, increasing urbanisation necessitating the increased mobility needs, low penetration levels and changing consumption pattern, are in place to fuel healthy demand in medium and long runs. This was the unanimous view that emerged at the 47th Annual Session of Federation of Automobile Dealers Associations (FADA) held at New Delhi on September 8, 2011.

Speaking on the occasion, V R V Sriprasad, Vice President - Mktg, Sales and After-sales, Daimler India Commercial Vehicles Pvt Ltd, said that radical changes are sweeping the Indian people - be it the way they communicate, travel, work or spend their leisure time. The changing preferences and life styles as well as ever increasing expectations of evolving consumer are continuously driving the vehicle technology and service standards to the next level. “Superior Products, innovation are necessary conditions, but will not be a sufficient condition for “Brand Differentiation”. Consumer experience will play a bigger role as product differentiation will cease,” he cautioned.

He said that dealerships’ paradigm is set to change as they face the OEMs and the customers - and both are becoming more demanding. “Those who are able to anticipate the changes on the horizon and keep pace will be able to survive and sustain. Professionalisation of retail operations is essential to keep pace with the ‘inevitable explosion’ in the auto sector,” he noted.

Talking about Daimler India Commercial Vehicles, Sriprasad said that Daimler, the inventor and pioneer of automobiles, is set to challenge the conventional wisdom and bring about a paradigm shift in commercial vehicle space. He revealed that Daimler India would be introducing the next generation trucks designed by the Indian engineers for the Indian people at competitive prices within a year to the challenge the near duopolistic character of Indian commercial vehicle industry in India.

Dr Rajesh Shukla, Director, NCAER-Centre for Macro Consumer Research, in his presentation, highlighted the Changing Indian Consumption Basket. He noted that while Rural India is still 13-14 years behind Urban India in terms of non-food consumption, the non-food consumption has been rising steadily both in rural and urban areas, which augurs well for automotive market in India. With GDP growth likely to rise by 9% through to the year 2015 and incomes of both urban and rural households rising, auto market is expected to record a healthy growth.

Anil Dua, Sr Vice President - Mktg & Sales, Hero MotoCorp Ltd painting a bright picture of automotive scenario, said that the huge untapped market would sustain the growth. He exhorted automobile dealers to create their own service brand equity, as it is the customers’ experience and service, which would be the differentiating factor in the highly competitive market. Dwelling on the relevance of theme “Gearing for Changing Paradigm”, he metaphorically likened the theme to “A B C D of Change”. He explained that “A B C D of Change” denoting ‘Accepting the Change’, ‘Being the Change’, ‘Celebrating the Change’ and ‘Driving the Change’ must be embraced by every one to be successful.

Satyendra Garg, Jt Commissioner of Police (Traffic), Delhi, voicing concerns over some of the practices adopted by automobile dealerships, said that markings, such as dealer’s/manufacturer’s name and/or logo on the number plates, were illegal and should not be done. He also pointed out the encroachment of public space, such as service lanes, footpaths, etc. by some of the automobile dealerships in Delhi for display of vehicles, which he said, caused inconvenience to the general public and hindered smooth flow of traffic. He solicited the support and cooperation of automobile dealers to avoid unpleasant situation of the towing away of the new vehicles and prosecution by the police.

Earlier, welcoming the guests, Nikunj Sanghi, President, FADA, said passenger vehicles that had been growing at a rapid clip have largely taken the hit arising from internal and external factors. Commercial vehicle sales, while still in positive territory, are growing. However, the current rate of growth pales against the heady 25% growth during the previous two years. The fact that two-wheelers are holding steady inspires confidence and guarded optimism.

Unrelenting inflation brought about by rising food, crude oil and commodity prices worldwide has chiefly played the spoilsport for the economy and auto industry. In spite of monetary tightening measures adopted by the RBI, inflationary expectations are not subsiding. Attendant ills in the form of higher lending rates are squeezing demand on one hand and increasing the cost of dealership operations on the other.

The problem for automobile dealerships is that they cannot play around much with their cost structure, for, most of the expenditure under various heads of dealership operation is inelastic and cannot be reduced. As the market matures and grows, the number of models and their variants also increase. Dealerships have to have in their inventory all such models and variants, as also their spare parts. Similarly, in an intense competitive environment, marketing effort has to be sustained to keep the sales kicking. With increasing tempo of economic activity leading to growing urbanisation and tightening of environment & safety laws, the real estate and compliance costs continue to rise unabated.

While the current scenario is not something to get gung ho, there are straws in the wind that send out positive signals. One, although the economy slowed down in the first half, India would still be able to post a decent 8% GDP growth during the current year - downward revision of economic growth by various national & international agencies and think tanks notwithstanding. Two, the middle income households in India continue to grow, which portends well for two-wheeler and passenger car markets, he added.

Expressing his cautious optimism, Sanghi hoped that the current slowdown is transitory and the Indian auto market will regain its buoyancy sooner than later, especially with new launches ready to be rolled out during the second half of the year.

On the occasion, Sudhanva Jategaonkar, Associate Vice President, Infomedia 18 made a presentation announcing the 3rd edition of Automotive Dealership Excellence Awards (ADEA 2011) - a joint initiative of FADA and Auto Monitor - for the automobile dealers excelling in various areas of auto retail, CSR and community service. The first ever awards for automobile dealers were presented at the Auto Summit on January 8, 2010 and the awards for the 2nd edition were presented at a glittering ceremony on 26th February 2011 at Mumbai. The previous two editions of ADEA evoked tremendous response. He announced that the awards to the winners in the 3rd edition of awards would be presented at a gala function on 9th January 2012 as a part of the programme of Auto Summit 2012 at New Delhi. He requested automobile dealers to participate in a big way, sending their nominations by 30th September 2011, to make the awards truly representative of the excellence in auto retail.

AGM and 258th Meeting of Council constituted afresh at the AGM

After lunch, FADA held its 47th AGM at the same venue at which the President briefed members on the activities of FADA during the year. Annual Report of Council and Annual Accounts of FADA for the year 2010-11, as received from the Council, were approved and adopted. The AGM thanked President and other office bearers for the earnest efforts put in by them and ably steering FADA during the year. AGM constituted a new FADA Council for the year 2011-12. The meeting also reappointed M/s Bhatia & Bhatia as auditors of FADA up to the conclusion of AGM next year. Soon after the AGM, the new Council met to elect President, Vice President, Hony Secretary and Hony Treasurer for the year 2011-12 and to chalk out the agenda for the next one year. Nikunj Sanghi, re-elected as President, thanked the Council, Past Presidents and members at large for continuing to repose their faith and confidence in him.

President said that while major issues of concern such as VAT, service tax, registration procedure and motor vehicle taxes would continue to engage the attention of new council, two major activities, currently on the top of FADA’s agenda, were: (a) Auto Summit 2012 and (b) ADEA 2011. He solicited the support and cooperation of new Council members to enlist large participation of automobile dealers in these two events, which, he said, not only help build bridges with various stakeholders, but also provide a lot of visibility and recognition to FADA as the ‘Voice of Dealers’.